Unrevised transcript of evidence taken before
The Select Committee on Olympic and Paralympic Legacy
Inquiry on
OLYMPIC AND PARALYMPIC LEGACY
Evidence Session No. 18
Heard in Public
Questions 275 - 281
WEDNESDAY 24 JULY 2013
11.20 am
Witness: Karren Brady
USE OF THE TRANSCRIPT
1. This is an uncorrected transcript of evidence taken in public and webcast
on www.parliamentlive.tv.
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contact the Clerk of the Committee.
3. Members and witnesses are asked to send corrections to the Clerk of the
Committee within 7 days of receipt.
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Members present
Lord Harris of Haringey (Chairman)
Lord Addington
Earl of Arran
Lord Bates
Baroness Billingham
Lord Faulkner of Worcester
Baroness King of Bow
Lord Moynihan
Lord Stoneham of Droxford
Lord Wigley
________________
Witness
Karren Brady, Vice-Chairman, West Ham United FC
Q275 The Chairman: Thank you very much for joining us this morning. As you have
gathered, this is a public session. We are currently being broadcast on BBC Parliament. The
transcript will appear on the website.
We will send you a copy of the uncorrected
transcript in case there are any factual errors in your evidence that you want to correct. As
an incentive to a quick reply, we will publish the uncorrected transcripts immediately on the
website, and as soon as you correct them that will be updated. We are going to start with
some questions. Notwithstanding what we have just heard from Mr Hearn, we heard in our
earlier evidence sessions that there was initially very little interest in the future of the
Olympic stadium from football clubs in the surrounding area. Could you tell us a bit about
when West Ham United decided that it wanted to move into the Olympic stadium? Was
any change in your approach on your part a result of new ownership, different economic
circumstances, or other factors?
Karren Brady: First, good morning and thank you for inviting me here today. David Sullivan
and David Gold took ownership of the football club in 2010, when in fact I was installed as
the vice-chairman, which in effect was the CEO. When we arrived we made a commitment
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that we would do three things. We would stabilise the club that we had inherited—we
inherited £100 million of debt—we would put the culture and integrity back into West Ham,
both on and off the pitch, and we would try to make the Olympic stadium our new home.
We publicised that on the very first day that we took ownership of the club.
That announcement was followed by a joint venture that we entered into with Newham
Council in March 2010. That joint venture was for us to jointly own the stadium on the
basis that the Olympic stadium and West Ham United are in Newham, and that our hopes
and legacies for the stadium in employment, young people and community were matched.
We are the only party that has taken part in all three processes to bid for the Olympic
stadium.
The Chairman: Clearly, this was a decision of the new owners and the economic
circumstances that the club found itself in. To what extent were you conscious of what has
been described to us as the weakness of the negotiating position of the London Legacy
Development Corporation? To what extent were you saying, “Actually, we have them over
a barrel here. This is the moment to move in”?
Karren Brady: That is simply not the case. West Ham is not the buyer and seller of the
stadium. The stadium was put up for tender as concessionaires, and anybody worldwide
could have bid to use it either as their permanent home or for one-off events. When we
put our bid together we considered carefully that we did not want something for nothing;
we wanted to pay our way. We had a lot to give up. We obviously own our own stadium.
We say when, we say how, we say what we do there and what happens there. We are in
charge of the timetable, and we would be moving to a stadium where that would not be the
case. A significant amount of money is being invested by West Ham into the stadium, into
the retractable seating and the reconfiguration to make it a sporting arena. That could not
be done without West Ham, without our rent, without the money that we generate for
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naming rights, catering and pouring income. All those things that amass to many, many
millions of pounds will be going into the stadium, and not into West Ham’s pocket.
Earl of Arran: Are you confident that the Olympic stadium can be used to house both
football and athletics, among other activities? How committed are West Ham United to
athletics as a core function of the stadium? Thirdly, how, in practice, will you make space to
allow the stadium to be used for athletics?
Karren Brady: We have always believed that the stadium would be a truly multi-national
sports arena. We have had, throughout this entire process, the backing of UKA for our bid.
That is the athletics. We believe that the stadium was built for athletics, and that legacy
must be delivered. We have in place a memorandum of understanding with athletics on how
we are going to work together to encourage our supporters to think about athletics. In
effect, we are the main winter tenant and athletics are the main summer tenant, and there
will be other one-off events that will happen around the stadium. We think that we suit
each other very well. We work very well with them and we have a very good relationship.
As I say, we have already entered into a memorandum of understanding. In effect, the
retractable seating allows the conversion between football and athletics to take place in as
little as seven days.
Q276 Lord Moynihan: Mr Hearn has argued the case for ground-sharing with Leyton
Orient. What do you see as the advantages and disadvantages of this approach?
Karren Brady: As part of the process, everybody who bid to occupy the stadium had to
agree to the principle of grounds-sharing, and West Ham did that. It was the LLDC who
decided who would be matched with whom, not West Ham.
Lord Moynihan: So you would not oppose it in principle.
Karren Brady: As part of the process, we all had to agree to the teaming arrangement, and
West Ham agreed to that teaming arrangement.
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Lord Moynihan: But what if LLDC had taken a different view and encouraged you to
grounds-share? My question is: would West Ham have any opposition to grounds-sharing in
principle? You talked a little while ago about a multinational sports arena. In other words,
you are very keenly interested in maximising the use of the facility, with athletics, other
sports and other entertainment. Was there anything in principle that you had against sharing
it with another football club?
Karren Brady: We could not enter the process if we did not agree to teaming, which we
did. It was the LLDC’s decision who would team with whom, not West Ham’s.
The Chairman: If the LLDC came back to you tomorrow and said, “We have changed our
mind,” would this present any issues for you?
Karren Brady: This process is part of a judicial review, so I have to be mindful of the
answers. The process was very clear. Everybody who bid for the stadium had to agree to
share the ground with whomever they were matched with. It was the LLDC’s decision who
would share with whom, not West Ham’s.
Lord Addington: So you would have no objection to sharing it with another football club.
Let us be quite clear.
Karren Brady: Well, there is no precedent of football clubs sharing working, but, as I say, as
part of this process of tendering to become one of the concessionaires, you had to agree to
the process, which West Ham did.
Lord Addington: So there is no deep-seated, core principle objection?
Karren Brady: West Ham had to accept that—
Lord Addington: No, it is the principle. Is there anything that makes your board revile at
the idea that you will actually be sharing a ground with a smaller, junior club that is going in
there? This is what we are trying to get out.
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Karren Brady: As I say, it is part of a judicial review, and I have to be mindful of that. I can
only say again that as part of this process we had to agree to teaming, which we did do.
Lord Addington: Is that a yes or a no?
Karren Brady: A yes or a no to what, sorry?
Lord Addington: Do you actually feel that another football club playing on that pitch on
other occasions is something that will really damage you, or would change the way in which
you would review being in the Olympic stadium?
Karren Brady: I am hopeful that the ground will be used to host other football matches, I
hope, in my lifetime, a World Cup, and, I hope, other big international football matches.
That is not the question. As we have said, it is a multi-use stadium, and it should be used for
other events. We hope that it is.
Q277 Lord Wigley: Could I just follow up? You said that at the initial stage you agreed,
because those were the rules of the game: that you would share with any club that may be
forthcoming. Has anything happened since you made that commitment that would make you
less willing to share?
Karren Brady: No. Our position has always been the same. I think there is no precedent
of ground-sharing in the UK, so there is no understanding of whether that would work or
not. It has not worked successfully in other parts of the world. Where it has worked more
successfully, it is where like-minded clubs have been matched. I think that there are some
difficulties in a club whose average gate last season was 4,200 in how they would sit and
occupy a 54,000-seater stadium. I think that would be a concern, but that would be a
concern for them and not for me.
Baroness King of Bow: Following up on that point, you do not object in principle to
sharing with Leyton Orient. Would it cost West Ham a lot of money if you shared with
Leyton Orient?
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Karren Brady: I do not think it would cost West Ham any money, no.
Baroness King of Bow: It does seem a bit strange from the outside, hearing that it is
impossible to accommodate such a small club next to your own. So you would not have a
problem with it.
Karren Brady: It is not in my gift. These are questions more suited to the LLDC.
Baroness King of Bow: I completely agree, but we would just like to know what your
position is, before those questions are put to the LLDC.
Karren Brady: My position is that when we bid for the stadium we were committed to
teaming.
Baroness King of Bow: Yes, we have heard that
Karren Brady: Our position has not changed.
Lord Faulkner of Worcester: The question the Lord Chairman asked you, though, is:
what if the LLDC said that in the light of subsequent developments, it felt that the future use
of the stadium should be as a shared football ground, as well as being an athletics ground and
a venue for other sporting events? You were listening very carefully to what Mr Hearn was
saying a few minutes ago. Clearly he is desperate to get Leyton Orient into the stadium.
Are you saying that if LLDC said, “We’ve changed our minds and we would now like you to
come to an agreement to share the ground”, you will be happy with that?
Karren Brady: I have to be mindful that this part of this process is part of a judicial review,
and I have to be mindful of my answers. There is no precedent for ground-sharing. There is
no precedent for how a football club with an average gate of 4,200 fills a 54,000-seater.
There is an understanding that every football club has to have supremacy of fixtures to be
able to fulfil its obligation to its league. Having two football clubs that have that priority
would be difficult. However, those issues are for the LLDC to consider in the decision that
they came to, not for West Ham.
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Q278 Lord Faulkner of Worcester: Do you feel that you have any responsibility, as a
large and successful Premiership club, for smaller clubs such as Leyton Orient? Do you think
that football supporters on the east side of London deserve to have a choice of clubs to go
to, and that West Ham therefore has an interest and a moral duty to help keep alive a club
that is obviously not as successful as yourselves?
Karren Brady: We are in different boroughs; the stadium and West Ham are in Newham,
and Leyton Orient is in Waltham Forest. Currently we are 2.9 miles away from them, and
when we move we will be 1.5 miles away, so we already have a relationship. We are
neighbours; they are local to us. We have had 17 consecutive sell-out grounds, and we
believe that a new stadium will fulfil our ambitions to get more people involved in football
and the work that we are doing in our community. We invented something called “Kids for
a quid”, which allows young people to come to football for a pound. We did six of those in
the Premier League last year, which increased our young person’s interest in football and
allowed the attendance of those that would never get the opportunity to come to Premier
League football to increase by 23%. Those are ambitions that we intend to fulfil when we go
to the stadium. However, a Leyton Orient supporter is not going to wake up tomorrow
and support West Ham, or vice versa. It is very probable that when we move to the
Olympic stadium, by encouraging 1.2 million people to come and use that stadium, there will
be a halo effect. People have come to the area and are interested in football in the area, and
that could filter through to Leyton Orient.
Baroness King of Bow: Do you think that the deal to allow West Ham to move to the
Olympic stadium offers value for money for the taxpayer?
Karren Brady: Absolutely I do. I think the alternative scenario does not bear thinking
about. West Ham is not getting a free stadium. The stadium was built for the Olympics; its
sole purpose was to house the Olympic Games, and that is what it was built for. Those
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Games have come and gone, and now here we have a stadium. What are we going to do
with it? Across the world, Olympic stadia that are not used die, and along with that dies the
legacy and the heart and soul of the park.
The cost of maintaining that stadium without anchor tenants would be huge to the taxpayer,
and this part of the process has certainly been a lead-in as well. Of course, the legacy
continues. In addition to that, we bring a worldwide audience for the Premier League that
runs into many millions, if not billions of people. In that respect, the legacy of the stadium
and its financial future have been ring-fenced, and we were able to offer 100 years of
commitment to having a concession there. We went for the full amount.
Baroness King of Bow: When do you think that taxpayers might be able to see a return
on their investment?
Karren Brady: I do not know what the running costs of the stadium are. As I say, when the
stadium was put up for anybody in the world to bid to be a concessionaire, some of the
interest was a Formula One concept that did not exist, a small college that is currently based
in Burnley, a self-proclaimed community club and West Ham as a Premier League club. We
made the best bid we could, based on many factors: lump sums, generated guaranteed rent
that is RPI’d every year, a commitment to the naming rights income, the catering income,
and various other source of income, that made us partners in that process. Not only that,
the legacy will deliver the 700 new jobs we have committed to bringing to the area. On top
of that, there is another regeneration project in Green Street, where more jobs are created
and family housing is created in the space where Upton Park is.
Q279 Baroness Billingham: We hear what you say, but you will know that it is hugely
controversial as far as the finance is concerned. I have quotes here from Richard Caborn,
the former Sports Minister, who said, “West Ham are basically getting a stadium costing
more than £600 million for just £15 million, and a small amount in annual rent”. That has
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been echoed by other people.
You have been asked already about the effect for the
taxpayer. How do you defend the situation that you now have in front of you, and think that
the deal that you have struck is in any way, in any objective view, fair?
Karren Brady: As I said earlier, I cannot be the buyer and the seller of the stadium. The
stadium has been built. It was built for the Olympics; it was not built for West Ham. The
alternative to West Ham is much worse for the taxpayer. If West Ham was not interested
in moving to that stadium, there would be no anchor tenant, and no community coming to
the stadium to use it. We offer 1.2 million visitors and a 365-day solution. That is incredibly
important for the legacy.
In terms of the finances, by the end of the 100-year lease, the taxpayer will be able to afford
to build two new Olympic stadiums, for the commitment that West Ham has made. That
commitment does not only go into the initial money, and the figures that you are talking
about are quite frankly wrong. However, I have signed a confidentiality agreement, which
does not allow me to give you the full figures. The money that West Ham will generate
from the stadium runs into many, many hundreds and hundreds of millions of pounds over
its lifetime.
Lord Bates: You mentioned the naming rights of the stadium. Could you just say a little bit
about how that will work and how the bidding process will work? If you are able to say so,
how much do you think you will get for the naming rights of the stadium?
Karren Brady: The naming rights are not West Ham’s to sell; they are the LLDC’s to sell.
The LLDC will operate that process. It will probably appoint somebody to sell them for it,
and it will determine the value and the amount of money that they take for them.
Lord Bates: That will all go to the LLDC.
Karren Brady: Yes.
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Q280 Lord Faulkner of Worcester: I have a quite straightforward question. We have
taken some evidence about disabled access to sports stadiums, and indeed to football
grounds. Can you give us an assurance that, when the top tier of the Olympic stadium is
taken off, there will be no reduction in the number of disabled spectator viewing areas, or in
the quality of sight lines, and that disabled fans will not be moved around from one part of
the stadium to another?
Karren Brady: I can give you absolute assurance of that.
Lord Stoneham of Droxford: Can I ask you a question about who will benefit from the
sale and redevelopment of Upton Park? Could you tell us a little bit? From my experience
of going there, a lot of money was spent there 10 or 12 years ago. I wondered how the
economics of that work out. How can the regeneration of the site be used to promote
economic development in this part of east London?
Karren Brady: First, Upton Park has not been sold, so no value has been determined. The
only thing I will tell you is that whatever it is sold for will be a considerable loss to the
investment that West Ham has made into that stadium over the period it has been there.
Lord Stoneham of Droxford: Is that because of the redevelopment work that was done?
Karren Brady: Yes, and of course it is not going to be a stadium when it is sold. It is more
likely to be a housing development with some commercial use. We have made a financial
commitment, a lump sum payment that we pay when we move into the stadium. It could be
that all the proceeds of the sale of Upton Park are used to fulfil that obligation, or it might
be some of them. I do not know until it is sold. In relation to the regeneration, obviously
we are talking about a huge project that would create jobs based in the construction
business. It would create new homes. Newham is a place where there is a big need for
family homes but a very short supply, and we hope that we will find a scheme that delivers
some family homes.
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Lord Stoneham of Droxford: Is the figure of 700 new jobs in the Olympic stadium a net
figure or in relation to what is going to happen in Upton Park?
Karren Brady: No, that is just at the Olympic stadium. There will be considerably more
jobs as a result of what happens in Green Street and the redevelopment of Upton Park.
Lord Stoneham of Droxford: You expect a net increase at Upton Park, then, given that
you currently have jobs there.
Karren Brady: Yes. Everybody who works for us will have the opportunity to come with
us. We do not intend to allow anybody to be left behind. West Ham currently employs 800
people, full and part time.
Lord Stoneham of Droxford: Does the 800 figure go down to 700 in the new stadium?
Karren Brady: No, it goes up by 700.
Lord Bates: On the sale of Upton Park, have you been approached by LLDC to ask for any
contribution from the sale proceeds towards the cost of the redevelopment of the Olympic
stadium?
Karren Brady: The deal that West Ham has with the stadium is that we have to put a lump
sum in. I do not think the LLDC is particularly concerned about how we generate the
money to do that. It wants to know that we have made that commitment. If the ground
does not raise the amount of money required to fulfil that commitment, then my two
chairmen, Mr Sullivan and Mr Gold, have guaranteed to pay the difference or pay the whole
amount.
The Chairman: Do you anticipate the sale of Upton Park to produce in excess of the
contribution you have to make?
Karren Brady: There is no way of knowing until the site is marketed and has been sold,
which at the moment it has not been.
The Chairman: You must have some projections.
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Karren Brady: The market is very difficult.
The projections that I had originally have
probably been halved. We did have a tentative deal in place, but unfortunately that fell away
because of the numerous delays. As you know, we started this process in 2010, and the
process has only just finished three bids later. That deal is now no longer on the table, so
we literally have to go back to the market and see who is available and interested.
The Chairman: Of what sort of sum were your tentative estimates?
Karren Brady: It is so commercially sensitive I would not be able to put it in an open forum,
because the site is yet to be marketed. The money that is generated from the sale of Upton
Park needs to do two things. I hope that it will be enough money to fulfil our commitment,
and I hope there will be some money to pay off our bank debt. As I said, when we bought
the club, we took on a considerable debt of over £100 million. At the moment, the ground,
which is worth considerably more to West Ham than it will ever be sold for, is used to
guarantee the bank debt. When that comes to be sold and we move, we will have to pay off
all our bank debt to move, because we cannot take debt with us.
Q281 Lord Stoneham of Droxford: You said your debt was £100 million when you
took over the club.
Karren Brady: That is right.
Lord Stoneham of Droxford: What is it at the moment?
Karren Brady: £70 million.
Lord Stoneham of Droxford: So the proceeds from the ground have to meet that. Is
that what you are saying?
Karren Brady: No, that is not what I am saying. I am saying that if there is any excess, it will
meet some of that debt, but I do not expect there will be. We will have to wait and see.
Lord Faulkner of Worcester: What is the anticipated income over the next two or
three years with the new television deal?
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Karren Brady: In turnover terms?
Lord Faulkner of Worcester: Yes.
Karren Brady: In excess of £100 million. When I took over the football club, it had not
made any money for a number of years. In my first year, we managed to make a trading
profit, and I hope that we will continue the drive to be a successful football club. Obviously I
have been a chief executive running football for over 20 years, and we hope that we can be
not only a club that finishes regularly at tenth or above in the Premier League but one that
fulfils its commitments, above the responsibilities we have to our area, to the nation in terms
of moving to the stadium.
Lord Addington: Talking about revenue streams, what happens if you have a bad season? I
am afraid West Ham are a little bit like where I come from in Norwich, and they have rather
too much a record of winning the championship every now and again. What would happen
to your business model in those circumstances?
Karren Brady: In the event that West Ham could not pay any rent or fulfil any
commitments that it had made to the LLDC, the two owners of the football club have
guaranteed personally to meet those commitments, so the stadium will never fail to fulfil its
business plan.
Lord Addington: The guarantee of your current owners, is that it?
Karren Brady: Yes, that is correct.
The Chairman: And if they sell up?
Karren Brady: If they sell up a percentage, if there is any gain, the price goes to the LLDC.
That was its commitment: that it would want to pay a percentage of that over to the
stadium. If they sell up, they sell that commitment to the next potential buyer. Mr Gold was
born in Green Street, and Mr Sullivan went to university in east London. I think that having
spent a lifetime, as two British businessmen, accumulating their income and paying their tax
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to buy West Ham, they hope to leave it to the very many generations to come of their
family.
The Chairman: Thank you very much for your evidence. That has been most helpful.
Thank you.
Karren Brady: Thank you very much.